REPEAL OF THE BANKRUPT ACT: MR. BENTON'S SPEECH; EXTRACTS.
The spectacle was witnessed in relation to the repeal of this act
which has rarely been seen before--a repeal of a great act of
national legislation by the same Congress that passed it--by the
same members sitting in the same seats--and the repeal approved
by the same President who had approved the enactment. It was a
homage to the will of the people, and the result of the general
condemnation which the act received from the community. It had been
passed as a party measure: its condemnation was general without
regard to party: and the universality of the sentiment against it
was honorable to the virtue and intelligence of the people. In
the commencement of the session 1842-'43, motions were made in
both Houses to repeal the act; and in the Senate the practical
bad working of the act, and of the previous act, was shown as an
evidence of the unfruitfulness of the whole system, and of the
justice and wisdom of leaving the whole relation of debtor and
creditor in relation to insolvency, or bankruptcy, to the insolvent
laws of the States. In offering a petition in the Senate for the
repeal of the act from the State of Vermont, Mr. Benton said:
"He would take the opportunity which the presentation of this
petition offered, to declare that, holding the bankrupt act to
be unconstitutional at six different points (the extinction
of the debt without the consent of a given majority of the
creditors being at the head of these points), he would vote for
no repeal which would permit the act to continue in force for
the trial of depending cases, unless with provisions which would
bring the action of the law within the constitution. To say
nothing, at present, of other points of unconstitutionality, he
limited himself to the abolition of debts without the consent
of a given majority of the creditors. This, he held, no power
in our country can do. Congress can only go as far as the
bankrupt systems of England and other countries go; and that
is, to require the consent of a given majority of the creditors
(four-fifths in number and value in England and Scotland), and
that founded upon a judicial certificate of integrity by the
commissioners who examined the case, and approved afterwards by
the Lord Chancellor. Upon these principles only could Congress
act: upon these principles the Congress of 1800 acted, in making
a bankrupt act: and to these principles he would endeavor to
conform the action of the present act so long as it might run.
He held all the certificates granted by the courts to be null
and void; and that the question of the validity would be carried
before the courts, and before the tribunal of public opinion.
The federal judges decided the alien and sedition law to be
constitutional. The people reversed that decision, and put down
the men who held it. This bankrupt act was much more glaringly
unconstitutional--much more immoral--and called more loudly
upon the people to rise against it. If he was a United States
judge, he would decide the act to be unconstitutional. If he was
a State court, and one of these certificates of discharge from
debts should be pleaded in bar before him, on an action brought
for the recovery of the old debt, he would treat the certificate
as a nullity, and throw it out of court. If commanded by the
Supreme Court, he would resign first. The English law held all
bankrupts, whose certificates were not signed by the given
majority of the creditors, to be _uncertificated_; and, as
such, he held all these to be who had received certificates
under our law. They had no certificate of discharge from a
given majority of the creditors; and were, therefore, what the
English law called '_uncertificated bankrupts_.' He said the
bankrupt systems formed the creditors into a partnership for the
management of the debtor's estate, and his discharge from debt;
and, in this partnership, a given majority acted for the whole,
all having the same interest in what was lost or saved; and,
therefore, to be governed by a given majority, doing what was
best for the whole. But even to this there were limitations. The
four-fifths could not release the debt of the remaining fifth,
except upon a certificate of integrity from the commissioners
who tried the case, and a final approval by the Lord Chancellor.
The law made itself party to the discharge, as it does in a case
of divorce, and for the sake of good morals; and required the
judicial certificate of integrity, without which the release
of four-fifths of the creditors would not extinguish the debt
of the other fifth. It is only in this way that Congress can
act. It can only act according to the established principles of
the bankrupt systems. It had no inherent or supreme authority
over debts. It could not abolish debts as it pleased. It could
not confound bankruptcy and insolvency, and so get hold of
all debts, and sweep them off as it pleased. All this was
despotism, such as only could be looked for in a government
which had no limits, either on its moral or political powers.
The attempt to confound insolvency and bankruptcy, and to make
Congress supreme over both, was the most daring attack on the
constitution, on the State laws, on the rights of property,
and on public morals, which the history of Europe or America
exhibited. There was no parallel to it in Europe or America. It
was repudiation--universal repudiation of all debts--at the will
of the debtor. The law was subversive of civil society; and he
called upon Congress, the State legislatures, the federal and
State judiciaries--and, above all, the people--to brand it for
unconstitutionality and immorality, and put it down.
"Mr. B. said he had laid down the law, but he would refer to
the _forms_ which the wisdom of the law provided for executing
itself. These _forms_ were the highest evidences of the law.
They were framed by men learned in the law--approved by the
courts--and studied by the apprentices to the law. They should
also be studied by the journeymen--by the professors--and by
the ermined judges. In this case, especially, they should be so
studied. Bankruptcy was a branch of the law but little studied
in our country. The mass of the community were uninformed upon
it; and the latitudinarians, who could find no limits to the
power of our government were daringly presuming upon the general
ignorance, by undertaking to confound bankruptcy and insolvency,
and claiming for Congress a despotic power over both. This
daring attempt must be chastised. Congress must be driven back
within the pale of the constitution; and for that purpose, the
principles of the bankrupt systems must be made known to the
people. The _forms_ are one of the best modes of doing this:
and here are the _forms_ of a bankrupt's certificate in Great
Britain--the country from which our constitution borrowed the
system. [Mr. B. then read from Jacob's Law Dictionary, title
_Bankruptcy_, at the end of the title, the _three_ forms of
the certificates which were necessary to release a debtor from
his debts.] The first form was that of the commissioners who
examined the case, and who certified to the integrity of the
bankrupt, and that he had conformed in all particulars to the
act. The second form was that of the certificate of four-fifths
of his creditors, '_allowing him to be discharged from his
debts_.' The third was the certificate of the Lord Chancellor,
certifying that notice of these two certificates having been
published for twenty-one days in the London Gazette, and no
cause being shown to the contrary, the certificates granted
by the commissioners and by the creditors were '_confirmed_.'
Then, and not till then, could the debtor be discharged from
his debts; and with all this, the act of 1800 in the United
States perfectly agreed, only taking two-thirds instead of
four-fifths of the creditors. Congress could only absolve debts
in this way, and that among the proper subjects of a bankrupt
law: and the moral sense of the community must revolt against
any attempt to do it in any other form. The present act was
repudiation--criminal repudiation, as far as any one chose to
repudiate--and must be put down by the community."
On the question for the repeal of the act, Mr. Benton took occasion
to show it to be an invasion of the rights of the States, over the
ordinary relations of debtor and creditor within their own limits,
and a means of eating up estates to the loss of both debtor and
creditor, and the enrichment of assignees, who make the settlement
of the estate a life-long business, and often a legacy to his
children.
"A question cannot arise between two neighbors about a dozen of
eggs, without being liable to be taken from the custody of the
laws of the States, and brought up to the federal courts. And
now, when this doctrine that insolvency and bankruptcy are the
same, if a continuance of the law is to be contrived, it must be
done in conformity with such a fallacy. The law has proved to be
nothing but a great insolvent law, for the abolition of debts,
for the benefit of debtors; and would it be maintained that a
permanent system ought to be built up on such a foundation as
that?
"Some months ago, he read in a Philadelphia paper a notice to
creditors to come forward for a dividend of half a cent in
the dollar, in a case of bankruptcy pending under the old law
of 1800, since the year 1801. And, three or four days ago, he
read a notice in a London paper, calling on creditors to come
in for a dividend of five-sixths of a penny in the pound, in a
case of bankruptcy pending since the year 1793. Here has been
a case where the waste of property has been going on for fifty
years in England, and another case where it has been going on in
this country forty-one or forty-two years. He had been himself
twenty-three years in the Senate, and, during that time, various
efforts were made to revive the old law of 1800 in some shape or
other; but never, till last session, in the shape in which the
present law passed. And how could this law be expected to stand,
when even the law of 1800 (which was in reality a bankrupt law)
could not stand; but was, in the first year of its operation,
condemned by the whole country?"
The passage of the act had been a reproach to Congress: its repeal
should do them honor, and still more the people, under whose
manifest and determined will it was to be done. The repeal bill
readily passed the Senate, and then went to the House, where it was
quickly passed, and under pressure of the previous question, by a
vote 128 to 98. The history of the passage of these two measures
(bankrupt and distribution) each of which came to an untimely end,
is one of those legislative arcana which should be known, that such
legislation may receive the reprobation which it deserves. The
public only sees the outside proceeding, and imagines a wise and
patriotic motive for the enactment of important laws. Too often
there is neither wisdom nor patriotism in such enactment, but
bargain, and selfishness, and duresse of circumstances. So it was in
this case. The misconduct and misfortunes of the banks and the vices
inherent in paper money, which had so long been the currency of the
country, had filled the Union with pecuniary distress, and created
an immense body of insolvent debtors, estimated by some at five
hundred thousand: and all these were clamorous for a bankrupt act.
The State of Mississippi was one of those most sorely afflicted with
this state of things, and most earnest for the act. Her condition
governed the conduct of her senators, and their votes made the
bankrupt act, and passed the fiscal bank through the Senate. Such
are the mysteries of legislation.
A bankrupt act, though expressly authorized by the constitution,
had never been favored by the American people. It was tried fifty
years ago, and condemned upon a two years' experience. Persevering
efforts had since been made for a period of twenty years to obtain
another act, but in vain. It was the opinion of Mr. Lowndes,
expressed at the last session that he served, that no act framed
upon the principles of the British system would ever be suitable
to our country--that the complex and expensive machinery of the
system, so objectionable in England, where debtors and creditors
were comparatively near together, would be intolerable in the
United States, where they were so widely separated, and the courts
so sparsely scattered over the land, and so inconvenient to the
majority of parties and witnesses. He believed a simple system
might be adopted, reducing the process to a transaction between the
debtor and his creditors, in which courts would have but little to
do except to give effect to their agreement. The principle of his
plan was that there should be a meeting of the creditors, either
on the invitation of the failing debtor, or the summons of a given
number of creditors; and when together, and invested with power to
examine into the debtor's affairs, and to examine books and take
testimony, that they themselves, by a given majority of two-thirds
or three-fourths in value, should decide every question, make a
_pro rata_ division of the effects, and grant a certificate of
release: the release to be of right if the effects were taken.
This simple process would dispense with the vexatious question, of
what constitutes an act of bankruptcy? And substitute for it the
broad inquiry of failing circumstances--in the solution of which,
those most interested would be the judges. It would also save the
devouring expenses of costs and fees, and delays equally devouring,
and the commissioners that must be paid, and the assignees who
frequently become the beneficiaries of the debtor's effects--taking
what he collects for his own fees, and often making a life estate
of it. The estate of a bankrupt, in the hands of an assignee, Mr.
Randolph was accustomed to call, "a lump of butter in a dog's
mouth;" a designation which it might sometimes bear from the
rapidity with which it was swallowed; but more frequently it was
a bone to gnaw, and to be long gnawed before it was gnawed up. As
an evidence of this, Mr. Benton read a notice from a Philadelphia
paper, published while this debate was going on, inviting creditors
to come forward and receive from the assignee a dividend of half a
cent in the dollar, in a case of bankruptcy under the old act of
1800; also a notice in a London paper for the creditors to come in
and receive a dividend of five-sixths of a penny in the pound in a
case depending since 1793--the assignees respectively having been
administering, one of them forty-one years, and the other fifty-two
years, the estate of the debtor; and probably collecting each year
about as much as paid his own fees.
The system has become nearly intolerable in England. As far back
as the year 1817, the British Parliament, moved by the pervading
belief of the injustice and abuses under their bankrupt laws,
appointed a commissioner to examine into the subject, and to report
the result of their investigation. It was done; and such a mass of
iniquity revealed, as to induce the Lord Chancellor to say that the
system was a disgrace to the country--that the assignees had no
mercy either upon the debtor or his creditors--and that it would
be better to repeal every law on the subject. The system, however,
was too much interwoven with the business of the country to be
abandoned. The report of the commissioners only led to a revision
of the laws and attempted ameliorations; the whole of which were
disregarded by our Congress of 1841, as were the principles of all
previous bankrupt acts either in Great Britain, on the European
Continent, or in the United States. That Congress abandoned the
fundamental principle of all bankrupt systems--that of a proceeding
of the creditors for their own benefit, and made it practically an
insolvent law at the will of the debtor, for the abolition of his
debt at his own pleasure. Iniquitous in itself, vicious in its mode
of being passed, detested by the community, the life of the act was
short and ignominious. Mr. Buchanan said it would be repealed in
two years: and it was. Yet it was ardently contended for. Crowds
attended Congress to demand it. Hundreds of thousands sent up their
petitions. The whole number of bankrupts was stated by the most
moderate at one hundred thousand: and Mr. Walker declared in his
place that, if the act was not passed, thousands of unfortunate
debtors would have to wear the chains of slavery, or be exiled from
their native land.